Is Asia-Africa growth corridor the answer to China’s BRI?

The recent summit meeting between Japanese Prime Minister Shinzo Abe and Indian PM Narendra Modi in Gujarat has set renewed impetus for an Indo-Japanese cooperation well in line with their calls for an Asia Africa Growth Corridor (AAGC) during their summit in November 2016. Starting with India and Japan and then expanding to ASEAN and Africa, the AAGC is commonly portrayed as a response to China’s Belt and Road Initiative (BRI). The vision, however, comes on the back of decades of cooperation amongst two of Asia’s largest democracies, both seeking an alignment of interests be it under democratic security cooperation or under Abe’s 2006 notion of an Asian ‘Arc of Freedom and Prosperity.’

During the visit, Abe reiterated his interest for a maritime security diamond of democracies led in cooperation with Australia and the US, and once more underlined India and Japan’s heavy dependence on a free and open Indo-pacific region. Though conceived of by democratic countries, “democracy” within the AAGC may just refer to the multilateral nature of the project itself. Nevertheless, increased connectivity and investment in businesses through private-public partnerships will aim at bringing prosperity to individuals across the regions.

On the state level, both leaderships’ decision to build a high speed rail network project between Ahmedabad and Mumbai might inspire a new approach to major infrastructure cooperation as countries seeking to employ their own citizens also want friendly interest rates on their loans. While there are structural hurdles within Japan and India that need to be addressed, their vision of a multilateral Asian and African Growth Corridor has the potential to provide states with an attractive new framework that increases regional economic growth and protects state-sovereignty.

Fearing both an overdependence on Chinese trade and debts from grand infrastructure projects, states are weary that Beijing’s revisionism will call upon strategic concessions as it seeks to carve its place in the Indo-Pacific.

Analysing the case of Sri Lanka, ORF maritime expert Abhijit Singh shows that there’s high reason to suspect that China will expand it’s berthing rights at the Hambanbota port to eventually account for its own military facilities. Through investments in port projects and rail construction such as the East Coast Rail Link project in Malaysia, where ports and rail are developed and heavily financed by China, Beijing may eventually be able to bypass Singapore, cut off key Malaysian trade routes and further weaken ASEAN unity by playing both neighboring states off against each other. Southeast Asian countries remember the decades of Chinese communist interference in domestic politics before Deng Xiaoping, and while the specter of fifth columnist communists has passed, key trading partners in Myanmar remain weary of the threat China can pose with its tacit support of ethnic Chinese and other proxies in the northeast. Fears of China’s expanding role in the economy and politics of the region raises questions of national sovereignty across the region.

What’s at play?

China has long feared a “Malacca dilemma”, a crisis in which the country’s main access to energy is cut off by an enemy power via the narrow straits of peninsular Malaysia and Sumatra. With 82% of Chinese hydrocarbons passing through this narrow area and intensifying competition amongst regional powers – not least the USA – China is rightfully concerned about the security of it’s natural resources. 76 years after attacking the US at Pearl Harbor following an oil and gas embargo, Japan also fears a sabre rattling neighbor controlling its access to trade and resources. Yet not only China and Japan are concerned: countries across the Indo-Pacific depend on open and secure trade routes to enjoy economic stability. For India, too, China’s decision to build an economic corridor with Pakistan through disputed Kashmir is symptomatic of a far greater Chinese revisionism and a break with the current rules based system.

What can the AAGC provide?

The AAGC offers a benevolent alternative to the BRI that holds significant potential for regional connectivity on a state-to-state level. Major railroad projects linking Delhi to Hanoi indicate an old interest within Southeast Asia to diversify trade and ties. Given Japan’s experience with mass projects and expertise in developing cutting edge train networks, such as the Shinkansen, there is room for cooperation. Despite prioritising less costly Chinese bids for rail development, a lowering of costs would benefit Japan as it enjoys greater trust within the region. Investing in strategic infrastructure projects such as ports, rails, and telecommunications would find receptive customers in countries seeking to minimise their dependence on individual trading partners.

With infrastructure projects providing local employment, both India and Japan’s investments in foreign economies can garner greater regional support for their vision. Japan’s own experience with setting up hospitals shows how this form of cooperation can ensure a more permanent Japanese presence without fostering local perceptions of foreign control. Matching Japan’s high skills and capital, India’s own size and experience with economic development has challenged it to pursue key technologies – be they in pharmacology or solar energy – on a mass scale. With close links in ASEAN, India is widely seen as a benevolent power and via its cultural and religious ties to diaspora populations, India has a strong advantage in promoting trade. A strong commitment from Japan and India regarding infrastructure and technology exchanges may go far in bridging the wide economic and geostrategic gaps across the regions.

AAGC weaknesses

Despite increased military and technological cooperation between Japan and India, both countries are at a disadvantage with regards to power projection across Asia and Africa. While it does not feature in the program of the AAGC, security plays a key role in foreign policy establishments across the Indo-Pacific. Unlike China, the third largest arms exporter globally, Japan and India face notable constraints. Where Article 9 of the Japanese constitution limits the size and engagements of the Japanese army, India, the greatest importer of weapons, remains far behind its main competitor. Economically, India also trails years behind its northern neighbor. Despite having the third highest number of PhD holders world-wide, lower levels of education amongst the bulk of the Indian population stand in the way of India making the most of its youth bulge. These challenges weaken both countries as they seek to project strength in their neighborhoods.

In fostering the growth of mid-sized businesses across the Growth Corridor, Japan and India hope to boost economic growth in their partners’ markets, while gaining strategic depth through increased regional ties.

Although filming movies abroad to encourage tourism may serve to increase cultural exchanges, structural changes within India and Japan must take place before the two can promote sustainable people-to-people exchanges. Modi’s “Make in India” campaign is a positive step, yet a legacy of non-alignment, and aversions to lower tariff regimes (such as those under the TPP), are further aggravated by a bureaucratic climate tying India down to place 130 on the ease of doing business index. Despite having a more positive overall domestic climate in terms of making business, Japan, through its maze of regulations in many ways remains closed to foreign businesses. Furthermore, Abe government’s attempts at increasing immigration – a necessity given Japan’s low birth rate and ageing population – continues to meet domestic opposition. With protectionism and significant domestic hurdles to overcome, it is difficult to envision both leaders effectively promoting meaningful regional integration on the people-to-people level.

With a perceived retreat of the US in Asia, a redefining of regional security structures is inevitable. For the current state of trade, and energy security to prevail, a balance of power can and must be ensured via strategic infrastructure investments as well as effective regional cooperation. With more agency provided to countries throughout the AAGC, fears of overdependence on any one trade route and power can be minimised. The true question that remains is whether India and Japan will be able to sell the project at home.